Money makes the world go round, or so they say, but is yours helping the right sort of world go round?
Where we keep our money is easily overlooked. It feels like too much of a hassle to change or that there aren’t any good options. Yet it’s a great way to make a significant impact. There may be a little short term pain (although not as much as you might think) but in the long run it won’t have any significant impact on your day to day life, beyond a warm glow of satisfaction that your hard earned cash isn’t funding arms dealers or new oil rigs.
How Your Money is Invested
A quick overview (and feel free to skip on if you know this stuff…). There are three main types of account that you are likely to have.
1.) A current or savings account where your money is held as cash at the bank and on which you may be paid a paltry amount of interest. The bank takes the cash that you deposit and chooses to invest it in whatever they like.
2.) An investment account where you use your cash to purchase investments as stocks, shares, funds, bonds etc. You will have chosen to some extent what investments you purchase.
3.) A pension. You may have more than one of these kicking around. The cash paid into the pension will be used to purchase investments. You may have chosen the type of investments, or you may be on a default investment. You may also have a SIPP where you chose the investments yourself (much like an investment account above).
So you can see that even if you think your finances are pretty straightforward, there’s a good chance that you have several different pots being invested in different places. What’s key here is how much control you have over the type of companies that your money is being used to support. With a current/savings account, you have no control, so if you want to decide where your money is being invested, you need to choose your bank carefully. Most high street banks will be investing in companies across all sectors, including Oil & Gas, Arms and Tobacco. With your investments you have more options, but unless you have purposely chosen to invest in ethical companies directly or in funds with a robust ethical policy, your money is again likely to be invested across all sectors. Pensions can be a little more complicated – you may be required by your employer to sign up to their scheme and many of these have limited options for ethical investments. However, you are free to move your money around between pension providers and this allows you to consolidate pensions you have from previous employers too.
So. How are you feeling? Are you confident that your money is being invested in a way that you are happy with or could you do better? If it’s the latter, read on!
Please note that the content below is provided for information and ideas and is not financial advice.
Level 1 (Easy) – Ethical Savings
Let’s start with savings accounts. They are easy to transfer and as you are likely to have limited interaction with them, they don’t feel like a headache to move. For a regular savings account (not an ISA) you can simply open a new account with an ethical provider and then transfer your balance across. For a cash ISA, it’s not much harder, you just need to make sure that you follow the proper procedure to transfer the money across – your new provider will help with this. It’s usually just a case of completing a straightforward form with your existing account details when you open the new account.
Watch out: Before transferring your savings, check whether they are instant access, whether you need to give a notice period before withdrawing money or whether they are in a fixed term account which doesn’t allow withdrawals before a certain date. If you can’t access the money straight away, set a reminder in your calendar to make the transfer when you won’t incur penalties.
Try: Triodos, Ecology Building Society and Charity Bank are innovative and highly ethical organisations. They all offer a range of savings accounts and cash ISAs. Otherwise, in general building societies are a more ethical choice than banks. Nationwide is the most well known and has a presence on the high street.
Take Action – Level 2 (Also Easy) – Ethical Everyday Banking
Switching your current account to a different bank feels like a real headache. There are all those direct debits to change and you need to tell everyone about your new bank details. Except that you don’t. Most banks are signed up to the Current Account Switch Guarantee which means that they will change all your regular incoming and outgoing transactions (direct debits, standing orders, salary etc.) for you, they will transfer over your balance and your saved payees and, for 36 months after the switch, any payments made to your old account will automatically be transferred to your new account and the person who made the payment will be notified of your new account details. So really, there’s no excuse not to.
Watch Out: Check if the bank you want to switch to is signed up to the Switch service here.
Try: Triodos is a great choice again, however it’s worth noting a couple of things. They are an online bank and so you can’t make cash deposits and there is a £3 monthly fee for the account (you can read why here). If either of these things put you off and you’d prefer to stay on the high street, Nationwide is a good choice.
Take Action – Level 3 (Moderate) – Ethical Investments
Switching your investments can be a little trickier, depending on where they are invested and how confident you are. There are a number of ethical funds available either through banks or investment platforms. It is worth doing your research here as the terms ‘ethical’ or ‘green’ have no fixed definition, so you need to read up on exactly what that means in each case. You can also invest directly in ethical companies through specialist platforms. If you are unsure at all, it is well worth seeking independent advice. There are IFA’s who specialise in ethical investment, such as Castlefield.
Try: Triodos (again!) offer ethical, transparent funds or the opportunity to invest directly in projects through an investment account or an ISA. They also have a crowdfunding platform. Abundance offers investment directly in projects tackling environmental and social issues again through an ISA or investment account.
Take Action – Level 4 (A Little Bit Harder) – Ethical Pensions
Did you know that nine out of ten workplace pensions are invested in the ‘default’ fund which means invested in all of the baddies we’ve already mentioned. In the UK there is around £2.2 trillion invested in pensions, so moving this money to more ethical investments would have a huge impact on the future of our planet. Unfortunately, if you are enrolled in a workplace scheme, you are likely to have no say in your pension provider, however you may well have a choice of which fund your money is invested in. Check whether there is an ethical option and if so, opt to invest your money there. If you are unhappy with the pension provider offered by your employer, why not speak to them about changing it?
You may also have other pots from previous employers or a Self Invested Pension (SIPP). With these, you have much more freedom to transfer and invest your money. If you are a confident investor or willing to pay for advice you can invest your money in much the same way as investments (see above). Alternatively, you can transfer your money to a pension provider with strong ethical investment options. Transferring your pension is straightforward, although it may take some time. When you open an account, the new provider will be able to guide you through the process.
Again, pensions are another area where it is well worth seeking professional advice from an independent advisor specialising in ethical finances.
Bonus Action (Very Easy)
Support Christian Aid’s Big Shift Campaign which is challenging big banks to stop investing in fossil fuels. They are currently targeting HSBC which is funding coal in Vietnam, Indonesia and Bangladesh. It takes less than 2 minutes to support the campaign by e-mailing the CEO of HSBC via a simple form here.
Ethical Finance Providers
Here’s a little more information about the providers mentioned above.
Triodos is an ethical bank offering current accounts, savings and investments. Unlike other banks, it is totally transparent about every project which it finances. Its ethical investment policy is extensive, ensuring that it only supports organisations which bring about social or ecological benefit, rather than simply screening out the worst offenders. It is a certified B Corporation. It also has a crowdfunding platform for investing directly in organisations delivering positive change.
Ecology Building Society offers standard savings accounts and cash ISAs. It uses your savings to support organisations or individuals addressing carbon reduction or other environmental issues.
Charity Bank offers savings accounts, and lends to charities and social enterprises who are working to create social change. They assess all projects across a number of areas, including environmental impact, before lending and publish details of all the projects which they finance.
Nationwide. If you want to bank on the high street, then Nationwide is a solid choice. It’s a building society which means that it is owned by its members and invests mainly in the housing sector.
Abundance is a platform for investing directly in projects which address environmental and societal problems. Featured projects have included renewable energy and affordable, low carbon housing. You can choose to invest via a simple investment account, through an ISA or a SIPP.
Good With Money is a great resource for learning how to make your money work hard for you while also doing good. They also have a Good Egg mark for responsible finance providers and a comprehensive guide to pensions.
Ethical Consumer – much of their content is behind a paywall, but you can access some useful information even if you do not have a subscription.
Share Action have really helpful and succinct information about pensions here.
Over To You
Do you already bank with an ethical provider? Has this encouraged you to make a switch? Got questions? Leave a comment below and let’s talk.